July 11, 2011
Tax Consequences to Fan Catching Derek Jeter's 3,000th Hit
Don't Mess With Taxes, Tax Implications of Derek Jeter's Historic 3,000th MLB Hit:
Christian Lopez, who was celebrating his 23rd birthday at new Yankees Stadium Saturday afternoon, gave the historic baseball to Jeter....
The good news for Lopez, aside from retrieving Jeter's hit and seeing his team win, is that he didn't leave empty-handed.
The Yankees gave Lopez four Champions Suite season tickets for the team's remaining home games, including playoff appearances. He also got front-row seats for today's game, as well as three bats, three balls and two number 2 jerseys, all signed by Jeter.
The bad news is that Lopez should shell out some bucks to talk with a tax specialist about the possible tax implications of the goodies he got from the Yankees.
Is the value of the expensive Yankees Stadium seating taxable the way prize winnings typically are? In a somewhat similar situation several years ago, MLB players and coaches (and other professional athletes) were hit with tax bills on the complimentary tickets they gave to family and friends.
What about the team paraphernalia Lopez got? Is it taxable immediately at its fair market value, or only at capital gains rates if he decides to sell any of it?
Or could the items be considered, for the recipient's purposes, tax-free gifts? Is there a corresponding gift exemption for corporations like the current $13,000 limit available to generous individuals?
And if there are taxes due, how strict will the IRS and the notoriously aggressive Empire State tax department be in trying to get their cuts? Will they let it slide rather than face the bad PR that's sure to ensue? Should they give Lopez a tax break here?
Tax attorneys, accountants and sports fans, what's your take? Will Lopez's moment in baseball history cost him at tax filing time?
For the answers, see:
- Joseph M. Dodge, Accessions to Wealth, Realization of Gross Income, and Dominion and Control: Applying the "Claim of Right Doctrine" to Found Objects, Including Record-Setting Baseballs, 4 Fla. Tax Rev. 685 (2000)
- J. Gordon Hylton, The “Who Owns the Baseball” Issue Just Will Not Go Away (Oct. 8, 2009)
- Lawrence M. Zelenak & Martin J. McMahon, Jr., Taxing Baseballs and Other Found Property, 84 Tax Notes 1299 (1999)
- Ball Busters: How the IRS Should Tax Record-Setting Baseballs and Other Found Property Under the Treasure Trove Regulation, 33 Vt. L. Rev. 43 (2008)
Related TaxProf Blog coverage:
- Tax Consequences of Catching Barry Bonds' 756th Home Run (July 25, 2007)
- More on Tax Consequences to Fan Catching Barry Bonds' 756th Home Run (Aug. 9, 2007)
- More on Tax Consequences to Fan Catching Barry Bonds' 756th Home Run (Aug. 23, 2007)
- The Taxation of Record-Setting Baseballs (Dec. 27, 2008)
- The Tax Consequences of Catching Home Run Baseballs (Apr. 11, 2009)
- Tax Consequences of A-Rod's 600th Home Run (Aug. 5, 2010)
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» Yankees fan possible $14,000 tax bill from Don't Mess With Taxes
I was going to hold onto this time for Follow-up Friday, but discussion of a potential $14,000 tax bill for the Yankees fan who caught Derek Jeter historic baseball hit is too big to delay. The New York Times has answered the questions I raised Sunday ... [Read More]
Tracked on Jul 12, 2011 10:34:16 AM
The NYT has picked up on the issue. These are always tough, because while the result seems quite clear from a practitioner's perspective, it is just so counterintuitive to everyone else. Surprising to see Graetz argue that they could be gifts...I hope he was joking.
Posted by: Jerome | Jul 11, 2011 9:24:29 PM
Why not? The Yankees clearly valued the ball at the value of the goodies.
Posted by: MochaLite | Jul 11, 2011 9:30:20 PM
I do believe that there will be a tax hit (no pun intended) to Mr. Lopez. It's funny that had the hit been a singe double or triple they would have awarded the ball to Jeter directly without any incidence, but that ball flying over the fence changed everything.
Here's one: Is it possible that the Yankees, by virtue of bestowing items upon Mr. Lopez, really acquired title to the baseball and then, by presenting it to Jeter, he has compensation income and the Yankees a deduction?
Posted by: Gerald Gensiejewski | Jul 12, 2011 1:37:31 AM
Let's assume that the return of the ball was a pure gift. What was its value at that point? Might there be a gift tax issue? And was the donee of the gift the NY Yankees or Derek Jeter? If the former, then its transfer to Jeter would be a "gift" or "compensation" to Jeter?
And let's assume that the NY Yankee's made pure gifts to the fan of tickets, etc. The fan should have no tax problem with that.
But were gifts involved or exchanges bargained for? Did the fan get fair value on the exchange?
In either case, what is the tax basis for the ball, presumably now in Jeter's hands?
To a fan, baseball is a game. Here we seem to have such a fan, pure of heart. Does he deserve punishment by way of the tax men (federal and state)?
Posted by: Shag from Brookline | Jul 12, 2011 7:41:20 AM
Or was it a loss...the ball had/has an estimated worth of 300k and the fan is only receiving 10-20k in a barter/sold/forfeited exchange; how does he have a taxable gain or any tax consequence? I would advise him to report, but no taxes are due on this transaction.
Posted by: donnal | Jul 12, 2011 8:44:44 AM
He must have basis in the ball...he would have to recognize the FMV as income and then take the loss. Unless he "donated" it to some Yankee 501(c)3 org or something...maybe the Hall of Fame? Then he could take a deduction for the amount of basis he got in the ball.
Posted by: George W | Jul 12, 2011 2:54:37 PM